The transcript of an interview with John Edwards, who until last week was a member of the Reserve Bank of Australia board.
The interview covers a number of topics, but to just pick out a few (bolding is mine).
On whether the big 4 banks should pass on the full RBA cut in their mortgage rate:
- I think the banks should have passed that on. I think it'd be helpful for the Australian economy and I rather think that's what the RBA would have intended... When you make a decision to cut by 25 basis points, you know, your intention is to affect household demand and lending and that affect is gonna be muffled.
On if the RBA is reaching the limit on what it can do (and if I can add in my opinion ... what an inane question ... OK, carry on):
- there's a huge amount more it can do if you had to. You could do what is happening elsewhere. You could buy bonds, you know, quantitative easing, you can buy mortgages, you can intervene directly in the exchange rate, you could go to negative interest rates if you wanted to, but we don't, because actually, the economy is performing quite well.
On reducing the budget deficit:
- I don't think the Government has a convincing plan to substantially reduce the deficit within a reasonable timeframe; that is, it's current plan depends upon a very, very big increase in personal income tax collections of the order of 20 per cent over the next three years and that really involves something like a 10 to 15 per cent increase in the personal income tax paid by all employees and basically I don't think that's on.
- It's a ludicrous situation now where Australia has - as a share of GDP, our cumulative deficits since the Global Financial Crisis are far bigger than the ones we had after the last two recessions in Australia, yet we hadn't had a recession. Our deficits today nationally are bigger than they are in Italy or Ireland, Portugal, Greece - countries which actually had very savage downturns in the Global Financial Crisis. This is just ridiculous.
h/t and thanks to @martin_whetton
